After weeks of delays, parliament on Tuesday rejected a Cabinet draft law that would have nominally privatized the country’s telephone monopoly.
The Cabinet proposed that the state should retain control of Ukrtelecom always by keeping one ‘golden share.’ This special share would have given the state the right to veto any decisions by company management if the Cabinet decided they threatened state interests or security.
‘The golden share is a major problem [in this law] – when potential investors read about it, they are shocked,’ said Oleh Shevchuk, head of the parliament’s communications committee and former commercial director of Ukrtelecom.
The Cabinet’s draft law also would have banned privatization of the physical infrastructure of the country’s telecommunications network in order to preserve the state’s monopoly over the cable system.
Shevchuk and three other deputies on the communications committee have written their own Ukrtelecom privatization bill. Their bill, which will be debated in parliament next week, would not give the government any special veto power and would sell off the primary telecommunications network.
However, in an attempt to appease leftist deputies, Shevchuk said his committee’s bill would allow the government to keep 50 percent of the company’s shares until parliament approved further privatization.
Shevchuk’s bill also stipulates a privileged sale of shares to Ukrtelecom workers and the management that would take place in the second half of 1999. The rest of the shares would be sold in 2000.
According to the State Property Fund Chairman Oleksandr Bondar, the state has yet to define how it would effect this preferential sale of shares next year. Such sales are usually conducted through a disbursement of privatization certificates, but these are to be phased out by next year.
Ukrtelecom is considered the most valuable state company that Ukraine has yet to privatize. Ukrtelecom owns all of Ukraine’s cable telephone networks, as well as most local and all regional telephone switching stations. It also enjoys a monopoly on servicing domestic phone calls.
The state telecommunications monopoly also holds majority shares in Utel, the international calls monopoly, and Ukrainian Mobile Communications, Ukraine’s largest mobile telephone company.
The company is one of the few Ukrainian state enterprises that remains profitable, despite its low efficiency and obsolete equipment. It reported net profits of Hr 13.12 million last year ($3.74 million US at the current exchange rate).
Shevchuk said that some parliament deputies were loath to privatize Ukrtelecom because they believe the proceeds will be misused.
‘They are afraid the money would be used to finance somebody’s election campaign,’ said Shevchuk. ‘But it’s unrealistic to expect to get any money [from Ukrtelecom] before the election.’
He added that before the company could be privatized, a full independent audit and evaluation would have to be conducted.
PricewaterhouseCoopers is currently conducting an audit of Ukrtelecom, as required by a European Bank for Reconstruction and Development project that would invest in modernization of the company’s infrastructure.
However, according to Shevchuk, another independent audit would be required before the company could be privatized.
